Growth, development and modernization are at the top of the agenda

Johannesburg is Africa’s most powerful commercial center—almost 75 percent of South African firms have their headquarters there

As South Africa begins its second decade of democracy, the national mood remains buoyant and positive. There is a continuing sense of optimism, with opinion polls showing that up to 90 percent of the population believe the country is going in the right direction. Business and consumer confidence are reported to be at their highest levels since the 1980s.

Since the end of apartheid in 1994, South Africans have embraced economic, political, and social freedom with enthusiasm. After the huge progress made over the past ten years, the economy is moving toward a higher trajectory of growth and development. Freed from the shackles of a politicized economy designed to benefit only a minority of the population, today’s South Africa is firmly focused on inclusion, empowerment, and equity.

Macroeconomic stability, increased competitiveness, and improved production provide a strong foundation for the future. President Thabo Mbeki, who returned to office in April for his second five-year term after the country’s successful third round of democratic elections, has promised “even greater advances.” Growth, development, and modernization are at the top of the African National Congress (ANC) administration’s agenda, as it works to raise the rate of investment in the country and reduce the cost of doing business.

Particular attention is being paid to encouraging the further growth of small, medium and micro enterprises (SMMEs), and to empowering sectors of the community that have hitherto been marginalized. The government is committed to a vigorous implementation of policies of urban renewal and rural development through an expanded public works program aimed at creating one million jobs and to the expansion of micro-credit.

“Our aim is to involve more and more people in economic activities,” says Minister of Trade and Industry Mandisi Mpahlwa. “That means giving people skills, enabling them to start small and medium enterprises and solving the problems of access to finance. We are growing the size of our economy, opening up more and more opportunities, and in that way we will be able to achieve true empowerment which is inclusive of large numbers of people.”

PRESIDENT THABO MBEKI says his second term will bring even greater advances

South Africa has the biggest and one of the most diverse economies on the African continent. GDP is forecast to increase gradually over the next few years. In the first half of this year the economy grew by more than 3 percent, with expansion in sectors across the board, from agriculture and manufacturing to services. The second quarter of the year marked an increase in real gross domestic product for the twenty-third consecutive quarterly period—the longest period of uninterrupted quarter-to-quarter growth since the data became available in 1960.

According to the South African Reserve Bank, the country’s central bank, the trajectory of growth has steepened noticeably since the second quarter of 2003, with each quarter's growth rate being higher than the one preceding it.

Higher economic output has been stimulated by lower interest rates, the government’s prudent fiscal policy, and higher international prices for commodities. Export volumes have risen considerably, with growth in mining exports led by platinum and coal, and increased foreign demand for the country’s manufactured products.

Alec Erwin, Minister of Public Enterprises, says, “There are not many nations around with a track record like South Africa’s for solving problems, building a nation and reforming an economy. The economy has performed well and will continue to grow. The important thing, as the President has said, is that we focus both on the need to be highly competitive and on the need to eliminate poverty—that we do not lose sight of what the job of the government is, which is to improve the lives of its people.”

Foreign investment is virtually unrestricted in South Africa with all business sectors open. Investors benefit from a competitive marketplace, an efficient business climate, low labor costs, excellent infrastructure, and low cost electricity. Incentives include zero rating for value added tax (VAT) on exports of goods and services and relief from various customs and excise duties, and there are special tax benefits for investors in strategic industrial projects.

South Africa’s infrastructure is modern and efficient and among the best on the African continent, making it an excellent base for accessing regional and international markets. The selection of the country by FIFA as the venue for the 2010 Soccer World Cup is prompting a new look at the transport system.

“This opportunity will help us to pump money into infrastructure development and expand our transport networks,” says Minister of Transport Jeff Radebe. The focus is on upgrading the national logistical system by improving the links between rail, road, airports, and seaports.

South Africa has good relations with its regional neighbors and is a key player in conflict resolution and moves to advance African socio-economic development. As President Mbeki says, his country remains committed to “building a peaceful, democratic and prosperous Africa.”

Lower interest rates, prudent fiscal policy and higher international prices have pushed the economy onto a higher trajectory of growth

South Africa is a fully-fledged member of the South African Customs Union (SACU) and the Southern African Development Community (SADC), and during its recent tenure as chair of the African Union, successfully intervened to bring peace in the war-torn Democratic Republic of Congo and Burundi. It is a driving force behind the New Partnership for African Development (NEPAD) and the new permanent seat of the Pan African Parliament (PAP).

Wiseman Nkuhlu, Chairman of NEPAD’s Steering Committee, says that it is almost inevitable that South Africa plays a leading role in Africa’s socio-economic development and that investment by South African companies into neighboring countries has a positive effect.

“South Africa stands to benefit from improved stability on the continent because it has a private sector that can invest in African countries,” he says. “South African companies are moving into Africa and acting as a kind of catalyst, showing that you can make money in countries like Malawi, which encourages companies from other parts of the world to come in.”